Iceland's ex-PM becomes first world leader to face trial over financial crisis

Former Prime Minister of Iceland Geir Haarde, center, is accused of negligence for failing to prevent the financial implosion from which the small island country is still struggling to recover.

By msnbc.com and news services

REYKJAVIK, Iceland -- Iceland's former prime minister went on trial Monday as the first world leader to face criminal charges over the 2008 financial crisis that affected much of the world economy.

Geir Haarde became a symbol of the bubble economy for Icelanders who lost their jobs and homes after the country's main commercial bank collapsed in 2008, sending its currency into a nosedive and inflation soaring.

Prosecutors opened the case at the Landsdomur, a special court being convened for the first time in Iceland's history. The trial is expected to last until mid-March, with the court taking another four to six weeks to deliver its verdict.

Haarde is accused of negligence for failing to prevent the financial implosion from which the small island country is still struggling to recover.

The former prime minister has rejected the charges, calling them "political persecution."

In the financial crisis's immediate aftermath, as unemployment and inflation skyrocketed, many sought to affix blame for the havoc across the 330,000-strong nation. A wave of public protests forced Haarde out of government in 2009.

Former British Prime Minister Gordon Brown described Haarde's behavior after the collapse of Icesave, which was owned by bank Lansbanki, as "unacceptable" and "illegal" at the time, according to IceNews, a news website covering Iceland, Scandinavia and Northern Europe.

U.K. savers lost millions of pounds when three of Iceland's banks failed.

IceNews reported that during his first morning in the witness stand, Haarde said it was now clear that the banks were under-capitalized, a fact which they covered up. The government had no way of knowing the truth, especially given that international auditors boosted the banks' claims, he said, according to IceNews.

Haarde pleaded not guilty and has sought to have all charges dismissed, calling the proceedings "preposterous."

He has insisted Icelanders' interests were his "guiding light" and blamed the banks for the crisis, saying government officials and regulatory authorities tried their best to prevent the crisis and that his "conscience is clear."

A last ditch attempt by Haarde's independence party to have the charges dropped was rejected last week in Parliament.